FRANKFURT, July 3 The European Central Bank left interest rates unchanged at record lows on Thursday, holding fire while it assesses the impact of a barrage of measures launched last month to pep up the flagging euro zone economy.
Following are comments by ECB President Mario Draghi at a post-meeting news conference.
"The exchange rate is not a policy target, but it has become important ... It is definitely very important for our outlook on price stability.
"When you look at reasons for low inflation today ... and you compare it with say three years ago, you have two stages. In the first stage, for about a year, year and a half, it was mostly the oil price and food prices ... that contributed for two-thirds to the following fall in the inflation rate from what it was then and is today.
"But then after one year and a half (it) was the exchange rate, because the contribution of energy decreased gradually. So of course the two things can't be added because the contribution of the exchange rate also works through the oil price and energy prices."
"If one wants to have a published account of the meetings, it gets a little complicated to have an account if you have monthly meetings. It is easier to have it if you have (meetings) every six weeks, because it gives space for producing the account in a way that doesn't disturb the expectations for further action and doesn't in a sense confuse the reception by the markets about the previous action that has been taken."
"We certainly don't think that our job is finished, not at all, not at all. I can restate that the Governing Council is unanimous in its commitment to use also unconventional measures after the Governing Council has just reiterated its commitment to keep interest rates at present levels for an extended period of time. So our job isn't finished.
"The issue is whether we should actually have each and every month the expectation for action. Now keep in mind that the expectation for action itself injects a certain market behaviour, produces a certain market behaviour, which may have nothing or very little to do with fundamentals. So it could become a self-fulfilling expectation with consequences on the markets."
"We are interested in ABS (asset-backed securities), as I said, to heal the impairment of the bank lending channel and we are interested because we want to channel lending into the real economy and more specifically to the SMEs. So it should be real ABS, as I said. No CDO squares or financial derivatives or things like that in this concept.
"It should be simple. Simple as ... was securitization in Europe until a few years, a couple of years before the crisis. And actually the most complex structures were certainly not generated in Europe. Banks and other European investors invested into these structures, but they were not by and large originated here, and it should be transparent.
"One of the problems with why - one of the reasons why securitization actually got rightly a bad name was that some of these products were so complicated that they could not be priced correctly. And so that is why transparency is going to be a key feature of this new concept."
NOT SYNCHRONIZING MEETINGS WITH FED
"We have no plan to synchronize our meetings with anybody else really. So we just - we will have our new cycle and we really - we are not going to think about other monetary policy jurisdictions on this."
CHANGES TO ECB MEETINGS, MINUTES TO BE RELEASED
"The Governing Council today announces that the frequency of our monetary policy meetings will change to a six-week cycle from January 2015. The reserve maintenance periods will be extended to six weeks to match the new schedule. Moreover, we announce our commitment to publish regular accounts of the monetary policy meetings, which is intended to start with the January 2015 meeting."
MORE REFORM NEEDED
"To strengthen the foundations for sustainable growth and sound public finances, euro area countries should not unravel the progress made with fiscal consolidation, in line with the Stability and Growth Pact and should proceed with structural reforms in the coming years."
"A further downside risk relates to insufficient structural reforms in euro area countries, as well as weaker-than-expected domestic demand."
RISKS ON THE DOWNSIDE
"The risks surrounding the economic outlook for the euro area remain on the downside. In particular, geopolitical risks, as well as developments in emerging market economies and global financial markets may have the potential to affect economic conditions negatively, including through effects on energy prices and global demand for euro area products."
"Economic indicators, including survey results available up to June, signal a continuation of the very gradual recovery in the second quarter of 2014. Looking ahead, domestic demand should be supported by a number of factors, including the further accommodation in the monetary policy stance and the ongoing improvement in financing conditions."
"The key ECB interest rates will remain at the present levels for an extended period of time in view of the current outlook for inflation. Moreover, the Governing Council is unanimous in its commitment to also using unconventional instruments within its mandate, should it become necessary to further address risks of too prolonged a period of low inflation."
MONETARY POLICY STANCE
"The combination of monetary policy measures decided last month has led to a further easing of the monetary policy stance. The monetary operations to take place over the coming months will add to this accommodation and will support bank lending."
"Inflation expectations for the euro area over the medium to long term continue to be firmly anchored, in line with our aim of maintaining inflation rates below but close to 2 percent."
"The latest information signals that the euro area economy continued its moderate recovery in the second quarter with low rates of inflation and subdued monetary and credit growth."
(EMEA Desk +44 207 542 4441)